All Forum Posts by: Jack Plantin

Looking to buy a SFR and either flip or BRRRR it. I have 30k cash.

Purchase price: 75k with 20% conventional loan + 5k closing costs. So around 19k out of my pocket for purchase.

I would take out the loan and he would give me 40k cash to put towards the mortgage leaving the loan balance at 20k (does this make sense? decreasing the principal payment to $100 a month)

Rehab cost: 12k (6k him, 6k me, most of the work done ourselves)

ARV: Good neighborhood, comps are 125k

So I am invested with 25k in cash and a 20k mortgage balance and he is invested with 46k in cash.

If we sell for 125k minus realtor commission 5% 6250 minus capital gain tax 5700 gain [selling price - (purchase price + renovation cost)] minus the 20k remaining mortgage balance. That leaves us with 93k in our pocket, right? 

His cash investment was 46k and mine was 25k, so he would get 2/3 of 93k and I would get the remaining 1/3? Is this fair? So my take home is 30.6k and his is 61.3k so 5.6k profit for me and 15.3k for him.

Alternatively,

Could I take a HELOC of 61k (His original 46k + 15k profit) out on the 125k ARV, leaving me with a HELOC payment of ~300 a month + the principal mortgage payment of $100 a month? So my cash out of pocket investment is still 25k, but I keep it as a rental and pay him off.

Rental income - 1200

minus

Mortgage/HELOC - 400

Taxes - 200

Insurance - 75

Vacancy - 60

Capex - 60

Garbage - 50

Water - 50

Repairs - 60

Total - 955

Cash flow = $245 a month or 10% COC

Alternatively,

Should I just get a HML for the renovations of 15k at 15% interest and do all of the work myself or pay contractors to do what I can't do? Leaves me with $355 mortgage and $15k + $2250 interest only payment to repay

Please let me know if either of these make sense or are a good idea. My goal is to get rehab/investing experience and a cash flowing rental in a good neighborhood with possibility of appreciation.

Regards,

Jack

 Understood. It is being sold by a wholesaler. Partner suggested both our names on the title. And he would take the lead with renovations. I would be on the minor share.

I think my ARV and rehabs are conservative. House has updated furnace, ac, and water heater, but is pretty old (1920s) so I budgeted 15% for capex/repairs.

I think I would be happy with earning 6k profit  + the experience.

Thanks for your input, definitely won't BRRRR unless appraisal comes out crazy high for some reason.

Legitimate HMLs are hard to come by right now credit score is mid 600s. I dont know if I have friends/connections at this point that would fund 50-65k of this deal.

Another reason is that my cash partner has rehab and flipping experience, I have none. So mainly I'd like to learn from him and split the difference in profits.

This is a deal with a friend. Confused how to structure the deal so it's fair for both of us. Or if it's better to BRRRR or Flip

He would either help with rehab or simply lend money at interest.

SFR 3 bed/1ba

Purchase details

Purchase: 47k cash

Closing costs: 2k

Rehab: 15k

I fund 22k cash, he funds 42k HML 12% interest only.

Rehab time is 2-3 months in our spare time and around $1000 in holding costs (taxes, electricity, water, etc.)

Rent post rehab

Rent income: 1000 a month

Fixed expenses: 612.50. 8% Vacancy, 8% capex, 7% repairs, W/S/G, 137.50 Taxes, and 10% property management

Gross income: $387.50 a month

Option #1 Cash out refinance

This is where I am confusing myself.

ARV: 95k

New mortgage of 75% LTV with $2k closing costs rolled in: 75,250

Does this mean if I cash-out refinance I would get 23.75k cash, and have a new loan of 75k?

If I owe a 45k HML and I am in for 22k, this means I have to pay him back the 23k difference after cash?

So essentially the total cash I would pay out of my pocket for this 95k cash flowing house would be around 45k? Does BRRRR work with a HML like this?

My brain is jumbled.

If I keep it as rental it cash flows $50 a month with ultra conservative expenses 15% capex/repairs, 10% management, 8% vacancy.

$50 a month for 45k investment is terrible, right?

Option #2

Partner and I rehab house together and net 20k after taxes/fees for 3 months of work.

He keeps 13.3k, I keep 6.6k and get experience.

Please let me know if I'm overlooking something. Obviously my cash reserves make any deal with a partner unfavorable to me, but I'm mostly looking for rehab/landlording experience.

Thanks Adrien, you're right. Took at look at treasurers website (instead of Trulia) for accurate NW Indiana taxes. On the few houses I've looked at, taxes ruined cash flow. I'll be patient and continue talking to lenders. Maybe BRRRR is the best option if I can organize a rehab.

Looking to finance a 70k SFR with preferably 20% down. Willing to go up to 25%. FICO is high 600's and it is 1st investment property.

Are any banks or private lenders funding these kinds of loans right now?

Credit score is high 600's. Unfortunately all lenders so far have said 25% down due to credit and low loan amount. No photos of the inside, just going off the realtor saying "it only needs cosmetic work and there is a tenant living there, so it can't be terrible". Would ask for an inspection period and refundable EMD with my offer.

Asking 5k lower to give myself cushion in case vacancy is higher than expected, or it needs major work in the next couple of years. At 60k, it is 11% COC which is lower than my 15% goal.

Hessville, Hammond, Indiana. Maybe you can tell me more about this area? I think NW Indiana in increasing in population (homeowners and renters attracted to lower taxes?) and this property is near 94. The realtor declined 55k, but said he would ask if bank will approve a short-sale.

Location: NW Indiana, greater Chicago area.

Asking price: 60k

Offer price: 55k

Loan amount: $41250 (25% down, 5.25 interest)

Expenses: $750 annual property tax, $900 annual insurance, 8% vacancy, 13% capex/repairs, self-managed for now.

Rent: Currently rented for $700 month to month, (tenant has been there 5 years, don't plan to increase rent right now), can be increased to 800/900 once cosmetic touch ups are done. Gas, electric is paid by tenant. Lawn care is done by tenant. Tenant reimburses landlord currently for W/S/G (sounds crazy to me, but it's in the lease according to agent)

Cash up front: $15750

Cash flow: $187 a month after expenses, 14.3% COC return, 8.75% cap rate.

Good deal or too risky in today's climate? This would be my first deal and the cash up front would take 2/3 of my savings.